Vessel operating costs on upward swing

Vessel operating costs are expected to increase in 2017 and 2018, according to the latest survey by international account and shipping consultant, Moore Stephens.

Repairs and maintenance and spares are the cost categories which are likely to increase most significantly in each of the two years.

The survey, based on responses from key players in the international shipping industry, predominantly ship owners and managers in Europe and Asia, revealed that vessel operating costs are likely to rise by 2.1 per cent in 2017, and by 2.4 per cent in 2018.

The cost of repairs and maintenance is expected to increase by 2.0 per cent during the period, while expenditure on spares is predicted to rise by 2.0 per cent in 2017, and by 1.9 per cent in 2018. Drydocking expenditure, meanwhile, is expected to increase by 1.7 per cent and 1.8 per cent in 2017 and 2018 respectively.

The survey revealed that the outlay on crew wages is expected to increase by 1.7 per cent in each of the years under review, with other crew costs thought likely to go up by 1.6 per cent in 2017, and 1.5 per cent in 2018.

The increase in expenditure for lubricants is expected to be 1.6 per cent during the period. Meanwhile, projected increases in stores are 1.5 per cent and 1.7 per cent in the two years under review, while management fees are expected to rise by 0.7 per cent and 1.0 per cent in 2017 and 2018 respectively.

The cost of hull and machinery insurance is predicted to rise by 0.5 per cent and 1.0 per cent, while for protection and indemnity (P&I) insurance the projected increases are 0.7 per cent and 1.1 per cent respectively.

The predicted overall cost increases were highest in the offshore sector, where they averaged 4.8 per cent and 3.8 per cent respectively for 2017 and 2018. By way of contrast, predicted cost increases in the container ship sector were just 1.1 per cent and 0.8 per cent for the corresponding years.

Operating costs for bulk carriers, meanwhile, are expected to rise by 1.9 per cent in 2017, and by 2.4 per cent the following year, while the corresponding figures for tankers are 2.1 per cent and 2.7 per cent.

Moore Stephens Partner, Shipping & Transport, Richard Greiner, said: “Predicted increases in operating expenditure are a matter of concern for any industry, and particularly one such as shipping in which a range of factors have conjoined in recent years to inhibit (and, in some cases, eradicate) profit margins. But shipping has seen a lot worse. If it does transpire that operating costs rise by 2.4 per cent in 2018, for example, that will still be less than one-sixth of the actual operating cost increases absorbed by the industry ten years previously,”

“It is significant that, for the first time, new regulations were included in the list of factors which respondents could cite as most likely to influence the level of operating costs over the next 12 months. It was even more significant, perhaps, that 15 per cent of respondents did indeed identify the cost of regulatory compliance as a major consideration when weighing future operating cost increases. The Ballast Water Management convention, now with an extended implementation window, is still potentially the most expensive item on the menu, but by no means the only one. Tellingly, one respondent referred to new regulations which ‘most of the time are unclear and indefinite.”